Federal Reserve & Interest Rates

The Labor Department released it’s September job’s report on Friday which had higher than forecast job losses.  This brings the total job losses since the recession began up to 7.2 million, the highest figures since the Great Depression.

Nonfarm payroll employment continued to decline in September (-263,000), and the unemployment rate (9.8 percent) continued to trend up, the U.S. Bureau of Labor Statistics reported today. The largest job losses were in construction,manufacturing, retail trade, and government. 

Many economists feel that the labor situation won’t improve for some time and that the unemployment rate could still be above the 9% mark into 2011.  This has prompted the Obama Administration to release a statement that it will “explore any and all additional measures” to spur growth.

The report is also a sobering reminder for many investors that the recovery is likely to be slow and will have some hiccups along the way.  The Federal Reserve also appears to be committed to keeping interest rates at near zero for at least another year, as inflation forecasts remain moderate for the next two years despite the explosive growth of the nation’s debt load.

While there has been recent talk of the government’s possible exit strategy from monetary and fiscal stimulus, it is apparent that it will need to be a slow and gradual process.  The risks of a double dip recession appears to be minimal at this time but the banking system is still in a fragile state and consumer spending remains depressed.

The Labor Department released it’s August job’s report on Friday which show the rate of job losses are slowly declining from the start of the year when monthly losses were averaging over 700k.  The labor situation is slowly getting better but it may be another few months before job creation starts again.

Nonfarm payroll employment continued to decline in August (-216,000), and the unemployment rate rose to 9.7 percent, the U.S. Bureau of Labor Statistics reported today. Although job losses continued in many of the major industry sectors in August, the declines have moderated in recent months.

The labor market typically lags behind the rest of the economy as businesses reallocate resources and many experts believe it won’t be until the start of next year before the labor market starts it’s own recovery.  We saw a large jump in job losses following the collapse of Lehman Brothers at the height of the financial crisis and the economy has shed nearly 7 million jobs since the beginning of the recession.

The situation will be slow to improve as the economy has mostly depended on massive government spending, in the absence of consumer spending, to work it’s way out recession.  The job creation aspects of this year’s stimulus package will take a couple more years before the economy sees the full benefit so even when the losses do stop, the unemployment rate could be moderately high for some time.

Economists still feel the rate will hit double digits before the year is out but by all appearances the worst appears to be over.  The Fed also appears to be committed to keep interest rates at their current level for some time which should also help matters as credit markets slowly return to normal and businesses gain access to much needed capital.

The Labor Department released it’s June jobs report on Thursday and the figures which were higher than forecast comes at a time that consumer spending continues to falter despite the fact it should be receiving a boost from this year’s stimulus payments.

Nonfarm payroll employment continued to decline in June (-467,000), and the unemployment rate was little changed at 9.5 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today.  Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and  construction.

While many economists at the Fed believe the economy will turn positive by the end of the year, they still concede the fact that unemployment will likely climb above 10% and that job losses will continue for some time.  The employment creation portion of the Obama administration’s stimulus package will take at least two years before the economy will see most of it’s benefits.

Thus far, the economy has lost approximately six and a half million jobs since the recession began and many feel that the figure could hit ten million before employment begins to turn positive.  The government has tried to help as best they can by extending the period of unemployment benefits but still a number of Americans are going through difficult times.

The time frame for an employment recovery will be difficult to predict and could lag as much as a year behind the economy’s recovery, if not longer.  While the economy may turn positive by the end of the year, a large component of that recovery will be the increased federal spending that has taken place.